High Speed Rail and the System of Cities in Asia

What Can We Learn from Transport Infrastructure Natural Experiments?

Over the last few decades, China, Japan and South Korea have spent billions to connect their superstar cities with other cities through a High Speed Rail (HSR) network. HSR represents a cross-city transit technology that is faster than a car but slower than a plane. I have argued that its comparative advantage is at a “sweet spot” distance of roughly 100 miles to 400 miles. Such a trip length is too far for a car but too short for a plane ride (given the hassle of going to the airport and navigating through the airport on both ends of the trip). With HSR in Asia, you go to a center city location to get on the train and you get dropped off in the destination city’s center.

When HSR connects cities, what new trades now occur that wouldn’t have occurred if the connection had not been built?

In 2013, I published a PNAS paper documenting that home prices rise in China’s 2nd tier cities after HSR connects such cities to Beijing and Shanghai. We argue that such cities effectively become suburbs for the superstar cities and represent a safety valve if the superstar cities “overheat” in terms of housing prices. In our new Work from Home (zoom) economy, the ability to visit the superstar city 1 day a week becomes even more valuable and more talent —- especially people who need more housing space will be attracted to decentralize to cities such as Tianjin in China.

In 2020, I published a Journal of Urban Economics paper documenting that in China that pairs of scientists located in different cities that are now connected by HSR are more likely to write more papers together. Younger scientists are more likely to move to the 2nd tier cities that are HSR connected to the superstar cities. So note that the fast transport technology across cities facilitates face to face interactions in the superstar city. In a sense, the HRS connects local labor markets and expands the local human capital agglomeration that Glaeser often discusses.

New research is investigating the consequences of HSR in other nations. Eunjee Kwon of USC Economics is exploring the impact of high speed rail in Korea and its possible role in shrinking the gender gap in earnings. Seoul is the nation’s major city and land prices are very high there. HSR connects 2nd tier cities to Seoul. As people decentralize and move to 2nd tier cities (due to the train keeping them connected to Seoul), the demand for industries where women tend to work in increases (so this is the “Female Bartik” demand shifter) and the supply of available child care increases. Such supply and demand forces both encourage more women to work. Eunjee studies the differential impact of the opening of HSR stations on women’s and men’s labor force participation. This is exciting research examining the consequences of HSR on quality of life.

These types of applied micro papers do not answer the welfare economics question of whether HSR is a “good investment”. That’s a hard question! These applied micro papers ask a more modest question; for various outcomes that we care about —- how are they affected by a change in transport technology? These form the ingredients for doing a full blown cost benefit analysis.